Should You Hire a Lawyer or Law Firm to Negotiate a Short Sale?

By
Real Estate Broker/Owner with StoneCrest 01704912, Cal Bar 242498

Should I use a Lawyer to Negotiate My Short Sale?

This is a question that is often posed to us by sellers who are underwater and looking to sell a property as a short sale. Most likely they have been aggressively contacted and pursued by a real estate agent by mail, phone or in person regarding selling their property and often I hear that the real estate agent will tell them that they DON'T need a lawyer or attorney to negotiate their short sale.

Typically when I hear this it is a major red flag to me regarding that particular real estate agent. This tells me that the real estate agent either is afraid to have a lawyer involved who will be representing the seller’s best interests for unscrupulous reasons OR it tells me that the real estate agent believes him or herself to be as good as an attorney such that the sellers don’t need an attorney’s service. They will try to play lawyer in telling the seller what certain contracts and documents mean and what the bank is asking them to agree to.

Language in Short Sale Addendum Requires Agents to Advise Sellers to Consult with an Attorney

This almost always backfires and is in direct contradiction with the short sale addendum that all real estate agents are required in California to have their seller’s sign, where it specifically states the following;

" Credit, Legal and Tax Advice. Seller is informed that a short sale may have credit or legal consequences and may result in taxable income to Seller. Seller is advised to seek advice from an attorney, certified public accountant or other expert regarding such potential consequences of a short sale."

There is a short sale agent in the area who recently wrote a blog article that I saw explaining how she was able to navigate a certain short sale because a second loan had been forgiven through a loan forgiveness program. These loans were forgiven in thousands of homes in connection with the various settlement agreements over a year ago but she just recently posted this blog like she had just figured it out or had come across it. The first thing to do in any shorts ale is to order a preliminary report which will show all liens and judgments that are on the property and then of course to contact the lenders to verify pay-off information.

Often a letter would have been sent to the seller from the lender informing them of the fact that their loan was being forgiven, but that doesn’t mean the seller would have received or retained the copy, or that the correct legal documentation was recorded with the county to show that the lien was reconveyed. I often see this. Her blog while she meant it to show that she considered herself as good as an attorney (which she literally said) and tried to discount the services of an attorney as only being done by staff only resulted in showing her ignorance of the work that attorneys do and proved the opposite, to me at least.

Examples of Short Sales Denied or Sellers Held Personally Responsible Even After Closing

I have many examples of sellers who attempted to short sale using a real estate agent alone, even by using the services of real estate agents who profess to be short sale experts, but who couldn’t get the job done and one of these things happened instead;

  1. The short sale as requested by the agent alone was denied, the seller hired my services and I got it approved. I have various tactics I can use depending on the bank and the sellers situation.
  2. The short sale was approved holding the seller liable for the difference, the real estate agent told the Seller the contract they had to sign agreeing to this was fine to sign and that they were fine after the short sale closed. The lender then sued the seller after the short sale closed. Prior to a law being passed in CA to avoid this I saw multiple instances of this. Some clients went on to sue their agents after being forced into bankruptcy over a debt they thought and were told was gone.

Why Hire a Lawyer To Negotiate Your Short Sale? An Actual, Recent Example.

Recently I had a younger couple in the Sacramento area that had gone down the same path that a lot of our short sale clients have; they bought a new home and then decided instead of playing landlord and renting out their previous home they wanted instead to sell it, but it was under water.

They were very concerned about “buy and bail” as well as a number of other factors concerning their liability, credit and tax implications and so they scheduled a consultation with me. I spent 2-3 hours personally consulting with them over a period of a month and 3 different consultations, all free of charge.

Please continue reading this blog article and this specific example and story at my BLOG.

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Experienced Sacramento Real Estate Attorney and Sacramento Realtor

Sarah Litchney is a licensed California Attorney, and Sacramento Realtor with StoneCrest Realty. StoneCrest Realty is a full service residential and commercial real estate brokerage.  Click the link to view the StoneCrest Realty blog.

Her practice centers on transactional real estate work. She represents developers, investors, and individual buyers and sellers and their funds in a wide range of matters including acquisitions, dispositions, development, leasing, financing, short sales, general real estate transactions and foreclosures. Her clients range from individuals, investors, corporations, and institutions across all asset classes of real estate, including residential, multi-family and commercial.

Contact Sarah Litchney by calling 916.378.5760.
Attorney, broker at StoneCrest Realty. DRE License # 01704912.
 

The information on this blog is not, nor is it intended to be, legal advice. Please contact us to obtain legal advice pertaining to your situation. The transmission of information by this blog does not create an attorney-client relationship with the law firm’s attorneys. The relationship would require direct contact between you and the firm, and would also require a written attorney/client agreement that confirms that a relationship is established for legal services to be provided. The invitation to contact the firm is not a solicitation to provide professional services, and should not be construed as a statement as to the availability of any attorneys to perform legal services in any jurisdiction in which such attorney is not permitted to practice. None of the communications transmitted via the blog constitutes a confidential communication, or creates an attorney-client relationship. This blog contains information on legal issues, and is not a substitute for legal advice from a qualified attorney licensed in the appropriate jurisdiction. 

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